OECD urges governments to rapidly unwind costly fuel duty cuts

{"text":[[{"start":12.04,"text":"Governments that rushed to cut fuel taxes after the start of the Iran war must swiftly phase out costly universal energy subsidies, the OECD’s new chief economist said. "}],[{"start":23.869999999999997,"text":"More than 25 countries — ranging from EU member states to emerging markets such as Brazil and India — have cut duties on fuel to shield consumers from the energy price shock driven by the conflict. Alternatives, such as price controls, subsidies or cash handouts, have been less widely adopted. "}],[{"start":44.81999999999999,"text":"But Stefano Scarpetta, who became chief economist at the Paris-based organisation this month, told the FT that tax cuts, while quick to implement, were too expensive to keep in place for long. "}],[{"start":58.39999999999999,"text":"Experience from the 2022 European energy crisis showed that “the cost of these policies is especially high”, Scarpetta said, referring to subsidies rolled out after Russia’s full-scale invasion of Ukraine. These fuelled inflation, stored up fiscal problems and blunted incentives to cut dependence on fossil fuels."}],[{"start":80.44999999999999,"text":"The European Commission has also cautioned the EU’s 27 member states not to spend excessively to protect consumers and industries from high oil and gas prices, as that risks tipping the bloc into a fiscal crisis."}],[{"start":95.83999999999999,"text":"The OECD is still expecting the Middle East conflict to drive inflation higher and hit growth over the coming months, despite the potential for exports to start flowing again through the Strait of Hormuz following the US and Iran’s agreement on a two-week ceasefire. "}],[{"start":114.77999999999999,"text":"IMF managing director Kristalina Georgieva also warned on Thursday that there would be “no neat and clean return to the status quo ante” following the conflict, even if the truce holds. "}],[{"start":128.42,"text":"She said that the fund’s “most hopeful” scenario still involves a downgrade to growth forecasts."}],[{"start":136.2,"text":"“Why? Because of [energy] infrastructure damage, supply disruptions, losses of confidence and other scarring effects,” Georgieva said in a speech ahead of the fund’s spring meetings in Washington next week. "}],[{"start":150.98999999999998,"text":"Scarpetta acknowledged that higher energy prices and the disruption to trade through the Gulf could also slow the rollout of AI. This would be another blow to the global growth outlook, since rapid adoption of AI tools was one of the main reasons the OECD was set to upgrade its forecasts for most major economies before the US and Israel began strikes on Iran in late February."}],[{"start":null,"text":"

"}],[{"start":177.82,"text":"Scarpetta said intense uncertainty made it more important for governments to make energy support measures time-limited and to target them at low-income households and energy-intensive businesses. "}],[{"start":190.25,"text":"An appropriate level of support for businesses would be “more difficult”, he said, given the risk of subsidies propping up “zombie” companies that should otherwise stop operating. This happened after the Covid-19 pandemic, when governments paid employers to keep workers in jobs. "}],[{"start":208.43,"text":"Governments should therefore ensure that companies shouldered some of the burden of higher energy costs, even if they offered some support to those unable to cope, he argued. "}],[{"start":219.48000000000002,"text":"Scarpetta spoke to the FT ahead of the launch of an OECD report setting out ways for governments to overcome a long-term slump in productivity that has undermined growth and living standards. "}],[{"start":233.98000000000002,"text":"He singled out the UK as one of the few countries where the growth outlook had not been improving even before the Iran conflict began. He urged Sir Keir Starmer’s government to do more to help young people into apprenticeships, cut childcare costs for working parents and iron out “kinks” in the income tax system that weakened work incentives for those with higher earnings. "}],[{"start":268.96000000000004,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1775777958_7829.mp3"}